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Litarowich v. Wiederkehr

July 23, 1979

NATALIE LITAROWICH, AN INFANT BY HER GUARDIAN AD LITEM WALTER LITAROWICH AND WALTER LITAROWICH, INDIVIDUALLY, PLAINTIFFS,
v.
FRANCIS WIEDERKEHR, JOSEPHINE WIEDERKEHR, EUGENE WIEDERKEHR, ESKA COMPANY, A CORPORATION OF IOWA, R & S HOME AND AUTO STORES, THE ESKA COMPANY, A DELAWARE CORPORATION, AND TALLEY INDUSTRIES, INC., A DELAWARE CORPORATION, DEFENDANTS



Cohen, J.s.c.

Cohen

The infant plaintiff was injured in 1976 while using an allegedly defective snowblower. She sued the owner and the retailer of the snowblower and several other defendants. One was The Eska Company, an Iowa corporation that made the machine in 1966. Another was Talley Industries, Inc., a publically traded Delaware corporation that purchased the assets of Eska (Iowa) in 1969. A third was The Eska Company, a Delaware subsidiary of Talley that was formed in 1969 to receive the assets of Eska (Iowa).

The matter is here on motions by Talley and Eska (Del.) for summary judgment. They say they may not be held liable for injuries caused by a defective product merely because they later bought and held the assets of the maker. Plaintiff agrees but

says that Talley and Eska (Del.) did more than merely buy the manufacturer's assets. They bought its name, its good will, its plant facilities, and continued its business. Eska (Iowa) received Talley stock in payment, and distributed the stock to its shareholders and then dissolved.*fn1 The transaction, plaintiff argues, was really a de facto merger or consolidation, in which predecessor liabilities survive. Therefore, the argument concludes, Talley and Eska (Del.) took on the contingent products liabilities of Eska (Iowa) whether they meant to do so or not.

The question whether a purchase of corporate assets is really a merger or consolidation can arise in a number of settings.*fn2 One of them involves contingent product liabilities.*fn3 It is surprising to find so few authorities analyzing and deciding the choice-of-law problems that multistate corporate acquisitions and reorganizations necessarily create. On the motions here, the appropriate choice of law is the dispositive issue.

The moving parties argued that they are entitled to judgment in their favor as a matter of Delaware law,*fn4 but correctly concede that under New Jersey law there are material facts in dispute that would defeat the motion.*fn5 There is no New Jersey authority dictating the appropriate choice of law to make in the present setting. McKee v. Harris-Seybold Co. , 109 N.J. Super. 555 (Law Div.1970), aff'd 118 N.J. Super. 480 (App.Div.1972), mentioned the issue but found it unnecessary to decide. Wilson v. Fare Well Corp. , 140 N.J. Super. 476 (Law Div.1976), did not mention it. All parties agree that New Jersey's choice-of-law rules invoke the local law of that state which has the most significant contacts and greatest governmental interest in the dispute and the parties. Heavner v. Uniroyal, Inc. , 63 N.J. 130 (1973); Rose v. Port of New York Auth. , 61 N.J. 129 (1972).

Eska (Iowa) was an Iowa corporation with its manufacturing facilities in Dubuque. Talley's headquarters are in Arizona. Its tie to Delaware arises only out of its incorporation there. Its stock is traded on the New York Stock Exchange. Eska (Del.) is physically located in Dubuque, Iowa, and, like the Iowa corporation before it, sells its products in many different states. The Agreement and Plan of Reorganization executed by Talley and Eska (Iowa) mentions Talley's New York counsel and Eska's Washington, D.C., counsel, and contains a provision that it be interpreted according to Delaware law.

Most of the little attention the present conflicts question has attracted has been in the federal courts. The results have varied widely. They seem to cluster, however, in two groups, one treating the successor liability issue as one of contract

interpretation, and the other focusing on the consequences of the relationship between the corporate parties and the injured plaintiff.

Kloberdanz v. Joy Mfg. Co. , 288 F. Supp. 817 (D.Colo.1968), arose out of a 1964 Nebraska injury for which plaintiff sought to hold defendant liable as the 1960 purchaser of assets of the manufacturer of a 1953 product. The manufacturer was a California corporation. The purchaser of assets was a Pennsylvania corporation. The question of de facto merger or consolidation was a question of California law, said the District Court sitting in Colorado, because the Colorado courts would interpret the contract of acquisition according to the law of the state where it was made.*fn6 Lex loci contractu no longer requires that result in New Jersey, but the case has another significance. If the law of California controlled the District Court, it was because the court conceived the question of successor liability as a question to be answered by the contract between ...


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